 SJ: Other tablets appear to be just a handful of credible entrants. Almost all use 7" screens compared to iPad 10″. Would offer 70% of benefits. But only 45% as large because of diagonal measure. 7" screens a bit smaller than bottom half of iPad screen. Not big enough to make great tablet apps.

 SJ: Apple has done extensive testing, really understands this stuff. Limits to how close you can place elements for usability. Why 10" is minimum size for great tablet apps.

 SJ: Every tablet user is also smartphone user. No tablet can fit in your pocket. Giving up precious display area to fit tablets in pockets isn't the way to go. Tweeners.

 SJ: Competitors have a tough time coming close to iPad pricing even with smaller screen. Apple creates own chip, battery chemistry, enclosure, everything. Incredible product, incredible price. Competitors will likely offer less for more.

 SJ: New crop of tablets will likely be DOA. Too small. Will increase size next year, abandon customers and developers who went 7-inch.

 SJ: Reason they wouldn't make 7-inch tablet isn't because of price point, it's because they think it's too small to express the right software. Apple is a software-first company. Developers aren't going to deal really well with different screen sizes, when they can't put enough elements on screen to build the apps they want to build. 7-inches isn't about cost, it's about value when you factor in software.

 SJ: Can't assume software will take care of itself. Can't just put in less memory, slower processor, assume software will come alive. It won't.

I was also on this call and remember distinctly that Jobs' tone was one of disdain for any product like this. As you can see from iMore's overview above, Jobs pretty much made it clear that Apple was not interested in making a smaller iPad.

I was, however, also at a Wall Street Journal event in 2003 when tech journalist Walt Mossberg asked Jobs if he would ever make a phone or a tablet and he denied having any interest in ever creating either. Of course, Apple did release an iPhone and an iPad and, in fact, it has become the market leader in each of those categories.

So what changed? Why did Jobs say one thing and then eventually do the opposite? Well, in hindsight, the technology and marketplace changed. We know now that as smartphones started to take off, Jobs and his team revisited this market segment and asked the question: could we make one better than any on the market today? They also asked: do we have or could we invent the technology needed to make it better? They already had the iPod and its content ecosystem to build on. We also know from comments Jobs made at the iPad launch that his design team actually showed him a tablet first and he asked them if it could be made smaller. The result was the iPhone.

As Apple designer Jonathan Ives recently told the London Evening Standard, "Our goals are very simpleto design and make better products. If we can't make something that is better, we won't do it."

Clearly, Apple has applied that thinking to smartphones and to tablets.

Now, there is another tablet design emerging that has garnered serious market interest. Granted, it is not taking off quite like the iPad has, but it shows real potential. Amazon's recent earnings report show that its Kindle Fire has been selling well, even if it is being sold below cost and subsidized. More importantly, it shows that people are interested in a 7-inch tablet at a low cost, contrary to what Steve Jobs said back in 2010. In last week's column, I pointed out that we could see other low-cost, subsidized 7-inch models emerge in the future, thus making these smaller and much less expensive tablets quite popular.

Now, put yourself in Apple's shoes. Steve Jobs said that 7-inch tablets were dead on arrival. But market conditions today, almost two years later, are much different. What would you do?

I suspect that the fall back answer to this can be found in Ives' comments. Unless Apple can make a better 7-inch tablet, it won't do it. Now here is an interesting question. Does anyone believe that Apple couldn't make a 7-inch tablet better than Amazon's Kindle Fire, Samsung's Galaxy Tab or Barnes & Noble's Nook Tablet? In fact, rumors are floating around that Apple might actually be working on a 7.8-inch version and it could be priced under $299.

Here is what Apple has to deal with: Amazon has shown that a low-priced 7-inch tablet has real legs. While people may not necessarily like the smaller screen, they sure like the smaller price tags.

So, does Apple abandon this low-end market in favor of its higher-valued products that are also priced much higher than the Kindle Fire, the Nook, and other 7-inch models? Or does it do its own version, one that is markedly better? Maybe it sells it at $249 or $299, a small premium over the others at $199 but much more elegantly designed and tied to Apple's great content ecosystem and retail stores. If so, would it cannibalize its higher-end iPads that are selling in big numbers today?

These are the calculated questions I suspect Apple is weighing internally. It will soon make some difficult decisions about this low-end, smaller-sized tablet market. While the company might be content with owning the upper-end of the tablet market, I am not quite sure it is willing to give up the opportunity to bring more people into the Apple world and ecosystem with a different model that is perhaps cheaper.

It could make permanent the lower cost iPad and maybe even drop the price down to around $349$50 less than it is todayto address demand. Or, it could bite the bullet and give customers a choice at both ends of the spectrum with a smaller, cheaper iPad that could sell perhaps three times as many units as its 9.7-inch model. Apple could then put a stronger emphasis on getting the current iPad into the enterprise and businesses, where it is already taking off in a big way.

Here is another problem that Tim Cook and his team must tackle: In Apple's last earnings call, Cook said Apple is making the new iPad as fast as it can but it is still in short supply. Given that problem, could the company even mass produce and meet the demand of a smaller model at a lower price that could outsell the current version?

I don't have answers to these questions but feel it is necessary to lay out the incredible market opportunity, as well as the current challenges Apple faces regarding a smaller iPad. Given these tough issues and the ramifications of the final answers, I am sure glad I am not in Tim Cook's shoes, and instead get to merely prognosticate from the sidelines.

Tim Bajarin is one of the leading analysts working in the technology industry today. He is president of Creative Strategies (www.creativestrategies.com), a research company that produces strategy research reports for 50 to 60 companies annuallya roster that includes semiconductor and PC companies, as well as those in telecommunications, consumer electronics, and media. Customers have included AMD, Apple, Dell, HP, Intel, and Microsoft, among many others. You can e-mail him directly attim@creativestrategies.com.

Tim Bajarin is recognized as one of the leading industry consultants, analysts and futurists covering the field of personal computers and consumer technology. Mr. Bajarin has been with Creative Strategies since 1981 and has served as a consultant to most of the leading hardware and software vendors in the industry including IBM, Apple, Xerox, Compaq, Dell, AT&T, Microsoft, Polaroid, Lotus, Epson, Toshiba and numerous others.
Mr. Bajarin is known as a concise, futuristic analyst, credited with predicting the desktop publishing revolution three years before it...
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